How to Make Smart Investments – Protecting Your Interests

The right investments can help you build wealth and secure your financial future. The wrong investments can leave you bankrupt or with significant losses that leave you in a deep financial hole.

Knowing where and how to invest your money can be tricky. There are many different ways to analyze potential investments, but it’s important to take some fundamental steps to protect your interests and avoid being the victim of investment fraud.

Ensuring Companies and Financial Advisers Follow Regulations

Any company that you want to invest in should be following regulations. And if you want to use a financial adviser, they must meet the right standards, such as:

·         Having adequate working capital as well as books and records

·         Following procedures for dealing with clients, such as delivering ongoing reports

·         Having robust compliance systems in place

Companies that do not follow regulations will ultimately face sanctions and other disciplinary measures. Not only are you at risk of losing your initial investment, but you may risk potential gains you could have seen had you invested in a compliant company.

Ask Questions and Do Your Research

If someone comes to you with a potential investment opportunity, make sure that you ask plenty of questions. Fraudsters are counting on you not asking any questions and just handing over your hard-earned cash.

It’s also important to do your own independent research. Don’t just rely on company press releases and message board postings. Take the time to understand the business and the company’s products and services. Read through their financial statements and search EDGAR.

If you don’t understand how the business works or can’t find information on their operations, it may be time to find a new company to consider. Famed investor Warren Buffett never invests in anything he doesn’t understand, and he recommends that other investors follow this advice.

Executive and Director Liability Insurance

Fraud isn’t the only concern when making investments. Even when investing in a financially sound company, there are still risks of losses. Sometimes, board directors and executives make bad decisions. Ultimately, it’s the investors who have to suffer the consequences of those bad investments.

Start-ups and companies in early growth phases know this. That’s why they take out director liability policies. These policies provide coverage against breach of duty or errors that could have significant financial consequences.

Companies that have this type of insurance and other policies that protect against liability have the interests of their investors in mind. They also have their own interests in mind, and this type of coverage can actually help them realize their goals for growth.

Many investors don’t realize that board executives and board members can be held personally liable for their decisions while directing a company. The top executives and board members are well aware of this risk, and won’t take a job with a company that won’t protect them from this risk. Companies that have director liability policies are better able to recruit and retain top-tier talent.

Insurance isn’t a foolproof shield against lawsuits, but it serves as an extra layer of security.



Alex is a small business blogger with a focus on entrepreneurship and growth. With over 5 years of experience covering the startup and small business landscape, Alex has a reputation for being a knowledgeable, approachable and entrepreneurial-minded blogger. He has a keen understanding of the challenges and opportunities facing small business owners, and is able to provide actionable advice and strategies for success. Alex has interviewed successful entrepreneurs, and covered major small business events such as the Small Business Expo and the Inc. 500|5000 conference. He is also a successful entrepreneur himself, having started and grown several small businesses in different industries.